IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 12-60561

CARL E. WOODWARD, L.L.C.; GRAY INSURANCE COMPANY,

Plaintiffs - Appellees - Cross Appellants

v.

ACCEPTANCE INDEMNITY INSURANCE COMPANY,

Defendant - Appellant - Cross Appellee

Appeals from the United States District Court 

for the Southern District of Mississippi

____________________________________

Before GARZA, SOUTHWICK, and HAYNES, Circuit Judges.

LESLIE H. SOUTHWICK, Circuit Judge:

This appeal presents the final set of issues arising from claims of negligent

construction of a condominium project in south Mississippi. The remaining

parties are a contractor and two insurers. The district court held that a

subcontractor’s Commercial General Liability (“CGL”) insurer breached its duty

to defend the general contractor. Disputed on appeal are the district court’s

holding that there was a duty to defend, the allocations of costs and attorneys’

fees, the award of extracontractual damages but denial of punitive damages, a

refusal to award pre-judgment interest, and the denial of permission to file a

post-appeal motion for attorneys’ fees. 

United States Court of Appeals

Fifth Circuit

F I L E D

February 11, 2014

Lyle W. Cayce

Clerk

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We conclude that the district court erred in holding that there was a duty

to defend. The allegations in the complaint, even if properly supplemented by

an engineer’s report that we will later describe, did not place the CGL insurer

on notice of a claim under the policy. In light of that conclusion, the remaining

appellate issues that concern the calculation and allocation of the costs of the

alleged failure to defend are moot. We REVERSE and REMAND for entry of

judgment for the subcontractor’s insurer.

BACKGROUND

Pass Marianne, L.L.C. contracted for the construction of condominiums on

the Mississippi Gulf Coast. The general contractor was Appellee Carl E.

Woodward. Among the subcontractors was DCM Corporation, L.L.C., who

entered a contract with Woodward for the concrete work. In November 2005,

DCM obtained a CGL policy from the Appellant, Acceptance Indemnity

Insurance Co. DCM worked on the project from January to October 2006. The

entire project was completed in August 2007. In October 2007, Pass Marianne

sold the condominiums to Lemon Drop Properties.

A year after purchasing the condominiums, Lemon Drop brought suit in

Mississippi state court againstits seller,Pass Marianne, and against Woodward. 

It sought rescission and actual and punitive damages for breach of contract and

for gross negligence. Pass Marianne filed a cross-claim against Woodward

alleging faulty construction and damage arising out of the construction. The

claims were eventually arbitrated. One of the most significant issues in the

arbitration was the fault of the concrete subcontractor, DCM.

Woodward was an additional insured under the CGL policy that

Acceptance issued to DCM. After Pass Marianne asserted its claims, Woodward

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through counsel demanded on May 6, 2009 that Acceptance provide a defense

and indemnity. Woodward sent to Acceptance the complaint in the lawsuit and

a report Pass Marianne had commissioned from the Rimkus Consulting Group

which stated conclusions about the nature and effect of the defective work. We

later discuss relevant details of the complaint and the Rimkus Report.

Acceptance responded by letter on September 11, 2009. It refused to

defendWoodward based on language in the following policy endorsement, which,

after identifying Woodward as an additional insured, limited coverage:

A. Section II – Who is An Insured is amended to include as an

insured the person or organization shown in the Schedule

[Woodward], but only with respect to liability arising out of your

ongoing operations performed for that insured.

In summary, the insured was DCM, the concrete subcontractor who is not

now a party. The endorsement stated that the general contractor, Woodward

(who along with its insurer is the Appellee here), could draw on the policy issued

to DCM by the Appellant Acceptance “only with respect to liability arising out

of [DCM’s] ongoing operations performed for that insured,” i.e., Woodward.

After quoting the foregoing policy language, the letter from Acceptance

also stated: 

Additionally, with respect to the subcontract agreement between

[Woodward] and [DCM], based on information presently available

to us, the Substantial Completion of the subject property occurred

on August 6, 2007, subsequent to the policy expiration date. 

Therefore, we must respectfully deny your tender of defense and

indemnity. 

Though not quoted in the September denial letter, the Endorsement that made

Woodward an additional insured also contained this exclusion:

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B. With respect to the insurance afforded to the additional

insured, the following exclusion is added:

Exclusions

This insurance does not apply to “bodily injury” or “property

damage” occurring after:

(1) All work, including materials, parts or equipment

furnished in connection with such work, on the project . . .to be

performed by or on behalf of the additional insured(s) at the site of

the covered operations has been completed; . . . .

After Acceptance and other insurers refused to defend, Woodward and its

insurer, Gray Insurance Company, filed a new suit in October 2009 in

Mississippi state circuit court against Acceptance and several other insurers. 

Woodward and Gray claimed these defendant insurers failed to defend and

indemnify Woodward in the arbitration. The case was removed to the United

States District Court for the Southern District of Mississippi. By October 2010,

all insurers settled except for Acceptance. Woodward, Gray and Acceptance filed

motions for summary judgment. The district court held that Acceptance had a

duty to defend Woodward. 

The district court concluded that certain issues could not be resolved on

summary judgment. Eventually, the district court conducted both a jury trial

and a bench trial as to different issues involving the financial burdens arising

from the claimed breach of the duty to defend. The district court entered a final

judgment for a total award to Woodward and Gray of $999,144.79. The award

was composed of attorneys’ fees, the costs of arbitration, and extra-contractual

damages. Acceptance appealed, and Woodward filed a cross-appeal. 

This appeal turns solely on the validity of the district court’s conclusion

that Acceptance had a duty to defend. We will discuss no other issue.

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DISCUSSION

I. Duty to Defend – Preliminary Points 

The district court held on summary judgment that Acceptance had a duty

to defend Woodward. We give de novo review to a district court’s grant of

summary judgment, applying the same standard as did the district court. 

Buffalo Marine Servs. Inc. v. United States, 663 F.3d 750, 753 (5th Cir. 2011). 

We review the district court’s conclusions of law, including the interpretation of

a contract, de novo. In re Liljeberg Enters., Inc., 304 F.3d 410, 439 (5th Cir.

2002). The parties agree that because Acceptance issued the policy in

Mississippi to a named insured who resided in and was a citizen of that state,

we are to apply Mississippi rules of construction to our interpretation of the

policy. “The interpretation of an insurance policy is a question of law, not one

of fact.” Corban v. United Servs. Auto. Ass’n, 20 So. 3d 601, 609 (Miss. 2009). 

We review the district court’s factual findings for clear error. Goodrum v.

Quarterman, 547 F.3d 249, 255 (5th Cir. 2008).

After oral argument, Acceptance raised a new issue under the policy. It

submitted two letters under Federal Rule of Appellate Procedure 28(j) that focus

on whether Pass Marianne’s claims ever identified an “occurrence” under the

language of this CGL policy. Acceptance did not make that argument as a

specific issue in its briefs.1 To support that the issue of “occurrence” had earlier

been briefed, Acceptance, in one of its Rule 28(j) letters quoted eight sentences

scattered over thirteen pages that discuss points relevant to such an argument. 

1

Indicative of what was not briefed is that neither of the precedents relied upon in a

recent Mississippi decision on this issue, to which Acceptance alerted us in a Rule 28(j) letter,

nor any related opinions, were cited or discussed in its briefs. See W. R. Berkley Corp. v. Rea’s

Country Lane Const., Inc., __ So. 3d __ 2013 WL 3884909 (Miss. Ct. App. July 30, 2013).

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Such random and unfocused references that do not cite the record or relevant

caselaw are insufficient briefing to preserve an issue for our review. United

States v. Stalnaker, 571 F.3d 428, 439-40 (5th Cir. 2009). Acceptance waived

the issue through inadequate briefing on appeal. FED. R. APP. P. 28(a)(8)(A). 

II. The Complaint and the Policy

Under Mississippi law, when determining whether an insurer has a duty

to defend, courts must overlay the language of the policy with the facts alleged

in the complaint. See Auto. Ins. Co. of Hartford v. Lipscomb, 75 So. 3d 557, 559

(Miss. 2011). No duty arises when the alleged conduct falls outside the policy’s

coverage. Id.

Pass Marianne was a defendant in the suit brought by Lemon Drop,

making the cross-claim Pass Marianne filed against co-defendant Woodward the

relevant “complaint.” The first part of the cross-claim that the parties identify

as relevant is Pass Marianne’s allegations of the following facts: 

(3) Woodward built the foundation piers in non-conformity with

plans and specifications and altered the blueprints in an attempt to

cover up this problem; 

The only other identified section is Pass Marianne’s claim of a breach of

contract.2 After realleging the foregoing facts, it stated as follows: 

COUNT III. BAD FAITH/BREACH OF CONTRACT

(43) [Woodward], independently and through their subcontractor,

2 The elements of breach of contract in Mississippi are: (1) the existence of a valid and

binding contract; and (2) its breach by the defendant. Bus. Commc’ns, Inc. v. Banks, 90 So.

3d 1221, 1224-25 (Miss. 2012). A tortious breach additionally requires an “intentional wrong,

insult, abuse, or negligence so gross as to constitute an independent tort.” Eselin-Bullock &

Assoc. Ins. Agency, Inc. v. Nat’l Gen. Ins. Co., 604 So. 2d 236, 240 (Miss. 1992).

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Jim Wallis and Son Roofing, Inc. intentionally and willfully violated

their contractual obligations to [Pass Marianne] in multiple cost

cutting and gouging ploys so as to entitle [Pass Marianne] to

damages, to include punitive damages due to the malicious and

willful nature of said breach.

 

Though Pass Marianne did not mention DCM in this cross-claim, it did reference

an aspect of the project that was DCM’s operational responsibility.

Besides sending the complaint with its letter demanding that DCM’s

insurer, Acceptance, and other insurers provide a defense, Woodward also sent

a report prepared by Rimkus Consulting Group, which was employed by Pass

Marianne in the arbitration and litigation. Generally, an insurance company’s

duty to defend arises only if a complaint has been filed that contains allegations

of conduct covered by the policy. Lipscomb, 75 So. 3d at 559. Nonetheless, if an

insurer’s independent investigation establishes facts that would present a claim

“which potentially would be covered under the policy, the insurer must provide

a defense until it appears that the facts upon which liability is predicated fall

outside the policy’s coverage.” Id. 

For our analysis, we assume without deciding that Lipscomb would make

the Rimkus Report relevant for purposes of determining whether Acceptance

had a duty to defend Woodward. The Rimkus Report was lengthy. Its

conclusions about concrete subcontractor DCM were that it did not comply with

the Design/Build Agreement or industry standards because the atrium floor was

not properly sloped, which prevented water from entering the drains properly. 

The Rimkus Report claimed that DCM failed to comply with the construction

drawings and industry standards by not installing a step in the slab at the

balcony exterior walls and doors. This problem allegedly caused damage to the

exterior walls ofthe condominium units. The Rimkus Report also concluded that

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the balcony floors were not properly sloped to allow proper drainage and

described problems with the finish of the concrete in the parking garage and

unsightly trenches that were cut into the concrete to assist with drainage. 

In summary, Pass Marianne’s cross-claim that DCM’s work did not

conform to specifications was supported by the Rimkus Report. The cross-claim

also alleged that the reasons for non-conformance were the intentional and

willful acts of the contractor Woodward and a subcontractor. The question for

Acceptance, and now for us, is whether those claims created a duty to defend

under this particular policy. 

We have previously quoted the policy language Woodward relied on in its

demand letter, namely, the additional-insured endorsement. It contained two

clauses that are relevant to this appeal. Section A provided that Woodward was

an insured, “but only with respect to liability arising out of your [DCM’s] ongoing

operations performed for that insured,” Woodward. Second, Section B stated

that the policy “does not apply to ‘bodily injury’ or ‘property damage’ occurring

after [all work] to be performed by or on behalf of the additional insured(s) at the

site of the covered operations has been completed.” 

Both sections affect the scope of coverage offered by the additional-insured

endorsement. The first section establishes the broad parameters of the coverage

as matters “arising out of [DCM’s] ongoing operations.” The second limits the

scope of coverage, specifically excluding property damage that occurs after all

the work at the site of the “covered operations have been completed.”

Acceptance does not dispute that the policy is an occurrence policy. An

occurrence policy provides coverage “regardless of when the act complained of

was discovered or notice provided to the insurer, as long as the act occurred

during the policy period.” Titan Indem. Co. v. Williams, 743 So. 2d 1020, 1024 

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(Miss. Ct. App. 1999). While the plain language of the policy provides coverage

only when damages occur during the policy period, there is no textual

requirement that liability arise during ongoing operations, only that liability

arise out of ongoing operations. We agree with a decision applying Mississippi

law that policy language providing coverage for “liability arising out of your

work,” requires only “a causal connection to ‘your work.’” Roy Anderson Corp.

v. Transcon. Ins. Co., 358 F. Supp. 2d 553, 562 (S.D. Miss. 2005).

In sum, the claim for liability need not be alleged during ongoing

operations. By that we mean that claims need not be asserted during the named

insured’s ongoing operations to fall within the scope of coverage, but the claims

must be causally related to the ongoing operations. Royer Homes of Miss., Inc.

v. Chandeleur Homes, Inc., 857 So. 2d 748, 753 (Miss. 2003). We cannot stop

here, though. Besides giving the words their plain and ordinary meaning, our

interpretation must give effect to each clause. Id. The additional-insured

endorsement excludes property damage occurring after all work has been

completed. This provision must be given equivalent weight when reading the

contract as a whole.

We now compare the complaint and the policy in order to analyze whether

a duty to defend arose.

III. Analysis of Whether a Duty to Defend Arose

Mississippi substantive law governs this suit. The meaning of “arising out

of [an insured’s] ongoing operations” is the phrase in need of interpretation.

There is no relevant decision from the Mississippi Supreme Court, leaving us to

predict how that court would decide the issue. Paz v. Brush Engineered

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Materials, Inc., 555 F.3d 383, 392 (5th Cir. 2009). Mississippi’s intermediate

court has recently addressed the issue. When lacking a ruling from the relevant

jurisdiction’s highest court, we will examine decisions of lower courts for

persuasive explications of state law. See Howe ex rel. Howe v. Scottsdale Ins.

Co., 204 F.3d 624, 627 (5th Cir. 2000).

The Mississippi Court of Appeals discussed the meaning of a CGL policy’s

additional-insured endorsement limiting coverage to “liability . . . caused in

whole or in part by [the subcontractor’s] ongoing operations performed for” the

additional insured. Noble v. Wellington Assoc., 2013 WL 6067991 (Miss. Ct. App.

November 19, 2013). Noble Real Estate, Inc. hired a subcontractor, Harris, to

perform dirt work and site preparation for a house it was building. Id. at *1. 

Noble was listed as an additional insured on Harris’s CGL policy, but the

endorsement was limited to liability caused by Harris’s “ongoing operations”

performed for Noble. Id. Harris completed his work by March 2006, and then

Noble built a house on the site. More than a year and a half after Harris had

completed his work, Noble sold the house. Id. at *2. The purchaser noticed

cracks in the house and an engineer determined there were foundation problems,

partially linked to the fill dirt beneath the slab. Id. The purchaser sued Noble,

who in turn sought coverage under Harris’s CGL policy’s additional-insured

endorsement. Id. at *3.

The Mississippi Court of Appeals interpreted the phrase “ongoing

operations” to refer to actions “actually in process,” concluding it could not

encompass “completed operations.” Id. at *4. The court rejected Nobles

argument that the phrase “caused . . . by [Harris’s] ongoing operations” was a

causal limitation to coverage rather than temporal, concluding that

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interpretation would read the word “ongoing” out of the endorsement. Id. at *5. 

The court determined it was “clear from the language of the endorsement that

Noble was only an additional insured for liability caused by Harris’s active work

on the site” and “equally clear the endorsement did not cover property damage

manifesting itself after Harris stopped working on the site.” Id. The court

concluded that if Harris’s performance caused the damage for which Noble was

liable, the cause was Harris’s completed work, not its ongoing operations. Id. 

Accordingly, Harris’s insurer did not owe any contractual duty to defend or

indemnify Noble under the terms of the additional-insured endorsement. Id.

The Noble decision relied in part on a Colorado Court of Appeals opinion

discussing a similar provision in an insurance policy. Id. at *4 (citing Weitz Co.,

LLC v. Mid-Century Ins. Co., 181 P.3d 309 (Colo. App. 2007)). In Weitz, five

months after a subcontractor’s work was completed,the property owner observed

water intrusion damage and sued the general contractor. Weitz, 181 P.3d at 310-

11. The general contractor later brought suit against the subcontractor’s

insurance carrier, asserting claims that included bad faith breach of the

insurance contract. Id. at 311. The Colorado court considered whether the

additional-insured endorsement, which extended the subcontractor’s liability

coverage to the general contractor only against liability “arising out of [the

subcontractor’s] ongoing operations,” also insured the general contractor against

liability arising out of the subcontractor’s “completed operations.” Id. at 312.

With reference to the plain meaning of words through dictionary definitions, the

court unpacked the term “ongoing operations” as follows: 

Neither “ongoing operations” nor “completed operations” is defined

in the policy. However, “ongoing” is generally defined as “that

[which] is going on: a: that [which] is actually in process . . . b: that

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[which] is continuously moving forward.” Webster’s Third New

International Dictionary 1576 (2002) (Webster’s 2002) . . . .

By contrast, “complete” is generally defined as “[b]rought to an end

or to a final or intended condition; concluded; completed; as, the

edifice is complete.” Webster’s New International Dictionary 456

(1927) (emphasis in original) (Webster’s 1927) . . . .

“Operation” is generally defined as “a doing or performing esp. of

action: WORK, DEED.” Webster’s 2002, supra, at 1581. The term

“operations” as used in the policy is the plural of “operation.”

Id. at 313 (alterations in original; some citations omitted). Because the

contractor’s liability for the water intrusion damage arose out of the

subcontractor’s completed operations – the work was completed five months

before the intrusion – rather than its ongoing operations, there was no coverage

under the additional-insured endorsement. Id. at 315. 

We are persuaded by Noble. Both Noble and Weitz support the proposition

that claims for liability can be brought after ongoing operations are complete,

but the underlying liability cannot be due to the “completed operations.” 

Acceptance’s additional-insured endorsement uses language limiting coverage

to liability arising out of ongoing operations that is very similar to the language

analyzed by the Weitz court. Further, Acceptance’s additional-insured

endorsement also includes a specific exclusion for property damage occurring

after all work has been completed. We interpret this endorsement as applying

to DCM’s ongoing operations, regardless of when the claim is filed, so long as the

liability does not arise out of completed operations. 

The conclusions drawn here are conclusions of law. The effect of a

contrary conclusion bears noting. Allowing coverage under this endorsement

because of an allegation that the additional insured failed to follow plans and

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specifications, effectively converts a CGL policy into a performance bond. These

two insurance products serve different ends. Mississippi courts have recognized

that CGL policies serve limited purposes based on their specific terms and

exclusions. For example, a recent Mississippi Court of Appeals case closely

parsed the language of a CGL policy, finding that it was intended to cover

accidental occurrences during construction, not intentional actions undertaken

by the insured contractor. See W.R. Berkley Corp., v. Rea’s Country Lane Constr.

Inc., __ So. 3d __, 2013 WL 3884909 (Miss. Ct. App. July 30, 2013). 

Consequently, the court reversed and rendered judgment in favor of the insurer

because the claims did not trigger the duty to defend. On the other hand, a

performance bond is a form of insurance that guarantees the completion of the

general contractor’s work on the project. See SCOTT C. TURNER, INSURANCE

COVERAGE OF CONSTRUCTION DISPUTES § 1:2 (West 2013). This Circuit has

previously noted the significance of the difference between these two forms of

insurance: “A CGL policy generally protects the insured when his work damages

someone else’s property. The ‘your work’ exclusion prevents a CGL policy from

morphing into a performance bond covering an insured’s own work.” Wilshire

Ins. Co. v. RJT Const., LLC, 581 F.3d 222, 226 (5th Cir. 2009).

Accordingly, the central issue is whether Woodward’s liability arose out

of DCM’s ongoing operations or its completed operations. This determination is

governed by the facts alleged in the complaint or, as here, in cross-claims. Auto.

Ins. Co. of Hartford, 75 So. 3d at 559. Liability “arises out of” the primary

insured’s operations if it is causally connected to the primary insured’s

operations. See, e.g., Mid-Continent Cas. Co. v. Swift Energy Co., 206 F.3d 487,

497 (5th Cir. 2000). It is apparent from the face of the cross-claim that Pass

Marianne’s claims for fraud, defamation, and breach of contract did not arise out

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of DCM’s ongoing operations of work for the condominiums.

3 We have previously

quoted Pass Marianne’s relevant claim: “Woodward built the foundation piers

in non-conformity with plans and specifications and altered the blueprints in an

attempt to cover up this problem . . . .” Pass Marianne then used these facts to

support a claim that Woodward and a subcontractor other than DCM had

violated their contract with Pass Marianne in an intentional and willful manner,

and that the violation caused damages.

Pass Marianne’s allegation that the foundation piers did not conform to

specifications is a claim of a construction defect. There was not an attendant

allegation that the non-conformity caused other damage. We will use the term

“construction defects” to mean workmanship not consistent with plans and

specifications. We do not include within the term any faulty workmanship in

violation of industry standards because the relevant claim here does not allege

any such defect.4 We have already determined that Pass Marianne did not

allege that the non-conforming concrete work led to any other damages while

operations were ongoing. Though any non-conforming construction by DCM

would have occurred during its ongoing operations, liability for defective work,

such as was alleged here, depends on other policy language. We will discuss how

3 Pass Marianne’s claims for fraud and defamation arise from Woodward’s alleged

intentional conduct, not DCM’s ongoing operations. Fraud and defamation involve intentional

acts with no causal relationship to the ongoing concrete and construction work.

4 One of the decisions relied upon by the district court simply for the principle that

unambiguous contracts are construed as written, discusses coverage of“faulty workmanship.” 

See Architex Ass’n, Inc. v. Scottsdale Ins. Co., 27 So. 3d 1148, 1161 (Miss. 2010). The state

court analyzed whether property damage, if caused by faulty workmanship, would be covered

under policy language requiring an “occurrence.” Id. We discussed earlier that Acceptance

did not sufficiently raise the question of whether an “occurrence” was involved here. Thus,

the central issue in Architex need not be addressed in our case. There was no discussion in

Architex of how to apply a policy provision regarding ongoing operations.

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such liability is assessed.

Courts have held, quite logically, that liability for construction defects

arises out of a subcontractor’s completed operations. See Weitz Co., 181 P.3d at

312 (holding construction defect liability was not covered under additionalinsured endorsement because it arose out of subcontractor’s completed

operations); Absher Const. Co. v. N. Pac. Ins. Co., 861 F. Supp. 2d 1236, 1250

(W.D. Wash. 2012) (finding that a construction defect, a heating system failure,

was excluded from coverage because it fell outside the “ongoing operations”

clause and was also excluded as “completed” work). Here, the alleged breach is

that the subcontractor did not build the foundation piers according to plans. 

That is an allegation that the completed building did not satisfy the terms of the

parties’ contractual agreement. Accordingly, even if Woodward’s liability for

Pass Marianne’s breach of contract claim is related to DCM’s concrete work,

Woodward’s liability did not arise out of DCM’s ongoing operations. The breach

necessarily arises from the completed construction, which is the point in time

when Pass Marianne received the completed building. 

Woodward disputes this conclusion, arguing that Pass Marianne’s

ownership of the property during construction means it was damaged regardless

of when it received the completed project. By this logic, a project owner could

assert a breach of contract claim against a contractor for any error made during

the course of construction, notwithstanding that the contractor might correct the

problem before completing the project. Rather, the caselaw we have discussed

supports that the liability for a construction defect, and any consequent breach

of contract, is determined after completion. This proposition is also supported

by the Mississippi courts’ determination that claims arising from construction

defects accrue, for statute of limitations purposes, after the construction project

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has been completed.5It follows that liability for construction defects, while

created during ongoing operations, legally arises from completed operations. 

It is true that Woodward’s liability for the alleged damage is causally

related to DCM’s operations. Though a causal relation is required, the policy

specifically excludes liability for property damage occurring after all work has

been completed. The damage alleged here arose from completed operations.

Woodward also argued that Acceptance waived the argument we just

discussed, namely,that no duty to defend Woodward existed because liability did

not arise out of DCM’s ongoing operations. The evidence relevant to waiver is

that in its memorandum in support of a partial summary judgment to dismiss

all claims of bad-faith, Acceptance stated that the relevant damage occurred

during DCM’s ongoing operations. We examine the memorandum.

One relevant section of Acceptance’s summary judgment memorandum

refers to a different policy exclusion. It is one denying coverage for damage to

the property “on which you . . . are performing operations, if the ‘property

damage’ arises out of those operations; or . . . [t]hat particular part of any

property that must be restored or replaced because ‘your work’ was incorrectly

performed on it.” The memorandum then discusses evidence that the

construction defects were discovered and rectified prior to the date of substantial

5The Mississippi statute of limitations period for actions arising from construction

deficiencies is six years. MISS. CODE ANN. § 15-1-41 (West 2013). Courts applying this statute

have determined that claims accrue after the project is completed, often when the owner or

occupant takes possession. See, e.g., Reich v. Jesco, Inc., 526 So. 2d 550 (Miss. 1988) (holding

defective design and construction claims arising from the collapse of a chicken house roof

accrued when the owner began actual use or occupancy ofthe building – after construction was

completed.); Lampkin v. Thrash, 81 So. 3d 1193, 1198 (Miss. Ct. App. 2012) (holding that

breach of warranty in construction of personal residence claim accrued on the date of

occupancy of the property – after construction was completed).

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completion. To apply this language to the argument being made on appeal,

namely, that “liability” must arise out of “ongoing operations,” is improperly to

equate the damage that the cross-claim described as being the non-conformity

of the work to the plans during ongoing operations with the need that liability

arise out of ongoing operations. We have already explained why that liability

arises after completion.

The other part of Acceptance’s summary judgment memorandum that is

said to constitute waiver is in an argument about the exclusion located in the

additional-insured endorsement. It excludes, as we quoted in full earlier,

coverage for any “property damage” that occurs after all work has been

completed. Acceptance repeats its earlier argument that “most, if not all, of the

alleged ‘property damage’” the cross-claim asserts is for the non-conformity to

plans and specifications that was discovered during construction and rectified. 

Nonetheless, Acceptance also argued that if property damage were later

discovered, then the additional-insured endorsement would exclude coverage of

subsequent damage. Regardless of this supplemental argument, neither the

cross-claim nor the Rimkus Report ever identified damage relevant to DCM’s

work other than the non-conformity to the plans and specifications.

We find no inconsistency and no waiver in either of these arguments. Our

issue is not whether DCM failed to comply with plans and specifications during

ongoing operations. The issue is whether Woodward’s liability arises out of

those ongoing operations. It did not. Woodward’s liability for breach of contract,

if any, flows from defects in the completed construction project. 

CONCLUSION

The claims Pass Marianne alleged against Woodward in its cross-claim

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 Case: 12-60561 Document: 00512528684 Page: 17 Date Filed: 02/11/2014
No. 12-60561

and restated in the Rimkus Report did not arise out of DCM’s ongoing

operations. Even accepting the district court’s factual finding that damage had

occurred during ongoing operations, the only “damage” supported by allegation

is the construction that was not in conformity with plans and specifications.

Liability for such damages arises out of completed operations, for which

Woodward was not an additional insured under the policy.

Because Pass Marianne’s claims fell outside the coverage of the additional

insured endorsement, Acceptance had no duty to defend Woodward. We

REVERSE the finding that Acceptance breached its duty to defend and the

award of damages, attorneys’ fees, and costs. We REMAND to the district court

for entry of judgment for Acceptance.

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 Case: 12-60561 Document: 00512528684 Page: 18 Date Filed: 02/11/2014